Administrative Guidelines: Subsidy Layering Review for Project-Based Vouchers, 12001-12007 [2020-04147]

Agencies

• DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Federal Register Volume 85, Number 40 (Friday, February 28, 2020)]
[Notices]
[Pages 12001-12007]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-04147]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-6201-N-01]


Administrative Guidelines: Subsidy Layering Review for Project-
Based Vouchers

AGENCY: Office of the Assistant Secretary for Public and Indian 
Housing, HUD.

ACTION: Notice.

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SUMMARY: This notice provides updated Administrative Guidelines 
(Guidelines) and requirements for Project-Based Voucher (PBV) Subsidy 
Layering Reviews (SLRs), to include new PBV Housing Assistance Payments 
(HAP) contract terms provisions, as amended by the Housing Opportunity 
Through Modernization Act of 2016 (HOTMA),

[[Page 12002]]

and SLR requirements for Mixed-Finance projects that may or may not 
include PBV assistance. This notice also provides transparency on HUD's 
expectations regarding cash flow, debt coverage ratios, net operating 
income, and operating expense trending requirements.

FOR FURTHER INFORMATION CONTACT: Miguel A. Fontanez Sanchez, Director, 
Housing Voucher Financial Management Division, telephone number 202-
402-4212 or Belinda Bly, Supervisor, Urban Revitalization Division, 
telephone number 202-402-4104 (neither are toll-free numbers). 
Addresses for both: c/o Office of Public and Indian Housing, Department 
of Housing and Urban Development, 451 7th Street SW, Washington, DC 
20410. Individuals with speech or hearing impairments may access this 
number through TTY by calling the Federal Relay Service at 800-877-8339 
(this is a toll-free number).

SUPPLEMENTARY INFORMATION: 

I. Background

    In support of HUD's mission to create quality affordable housing, 
HUD provides funding assistance to incentivize affordable housing 
development. Subsidy layering reviews (SLRs) are undertaken to ensure 
the amount of assistance provided by HUD is not more than necessary to 
make the PBV project feasible in consideration of all other 
governmental assistance. SLRs prevent excessive public assistance that 
could result when a development proposes combining (layering) the HAP 
subsidy from the PBV program with other public assistance from Federal, 
State, or local agencies, including assistance through tax concessions 
or credits.
    SLRs for PBV assistance are required pursuant to Section 8(o)(13) 
of the U.S. Housing Act of 1937 (42 U.S.C. 1437f(o)(13)); section 
2835(a)(1)(M)(i) of the Housing and Economic Recovery Act of 2008 
(HERA); and section 102 of the Department of Housing and Urban 
Development Reform Act of 1989. SLRs are only for proposed PBV new 
construction and rehabilitation projects prior to the execution of an 
Agreement to Enter into Housing Assistance Payments Contract (AHAP).
    SLR requirements are not applicable to existing housing.\1\ 
Specifically, an SLR is not required for a project already subject to a 
PBV HAP contract, even if that project is recapitalized with outside 
sources of funding (i.e., a PBV HAP-assisted project under contract for 
10 years which then receives a tax credit award to address 
rehabilitation needs). PBV regulations define existing housing as units 
that already exist on the proposal selection date that substantially 
comply with Housing Quality Standards (HQS) on that date. (The units 
must fully comply with the HQS before execution of the HAP contract.) 
In addition, no SLR is required when PBV is the only governmental 
assistance provided to a project.
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    \1\ Section 2835(a)(1)(F) of Housing and Economic Recovery Act 
of 2008 (Pub. L. 110-289), enacted July 30, 2008, does not require 
subsidy layering review for existing housing.
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    Pursuant to 24 CFR 983.55, public housing agencies (PHAs) must 
submit a request for an SLR for a proposed PBV project when the project 
includes other governmental assistance. HUD can perform the SLRs in all 
cases; however, HUD has also delegated authority to participating 
Housing Credit Agencies (HCAs) as defined herein when the other 
governmental assistance includes Low-Income Housing Tax Credits 
(LIHTC).\2\
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    \2\ Pursuant to the Housing and Community Development Act of 
1992 (Pub. L. 102-550, approved October 28, 1992), as amended by the 
Multifamily Housing Property Disposition Reform Act of 1994 (Pub. L. 
103-233, approved April 4, 1994) added a ``Subsidy Layering Review'' 
provision at 42 U.S.C. 3545.
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II. Subsidy Layering Review

A. Definitions

    Housing Credit Agency: For purposes of this notice, an HCA is a 
state housing finance agency or other state agency defined by section 
42 of the Internal Revenue Code of 1986. HCAs are sometimes referred to 
by other names, such as State Housing Finance Agencies or State Housing 
Corporation. A participating jurisdiction under HUD's HOME Investment 
Partnerships program (see 24 CFR part 92) may also serve as an HCA.
    Mixed-finance development: Development or modernization of public 
housing pursuant to 24 CFR 905 Subpart F, where public housing units 
are owned by an entity other than a PHA.
    Other government assistance: Any loan, grant, guarantee, insurance, 
payment, rebate, subsidy, tax credit, tax benefit, or any other form of 
direct or indirect assistance from the federal government, a state, or 
a unit of general local government, or any agency or instrumentality 
thereof.

B. Requesting a SLR for a PBV Award

    When a PHA selects a project that is either new construction or 
rehabilitation, as defined in 24 CFR 983.3, for a PBV award, and the 
project will include forms of governmental assistance other than PBVs, 
the PHA must request an SLR. PHAs request an SLR through their local 
HUD Field Office or, if eligible, through a participating HCA. A list 
of participating HCAs is posted and updated periodically on the Housing 
Voucher Financial Management Division (FMD) website, found at: https://www.hud.gov/program_offices/public_indian_housing/programs/hcv/fmd. The 
participating HCA may charge a fee to perform the SLR, which the PHA 
may pay using Administrative Fees or Administrative Fee reserves.
    The PHA is responsible for collecting all required documentation 
for the SLR from the project owner. A list of all the required 
documentation is included in Appendix A. If after the initial 
submission new information becomes available, the PHA is responsible 
for submitting updated information to HUD or the HCA. The PHA maintains 
a project file with a complete set of the required documents. As part 
of the project selection process and application for PBVs, the project 
owner must disclose all HUD and/or other Federal, State, or local 
governmental assistance committed to the project, as well as other 
governmental assistance, using Form HUD 2880 (even if no other 
governmental assistance is received or is anticipated). If PBV is the 
only governmental assistance, an SLR is not required. Whether the PHA 
or HCA performs the SLR, the PHA must confirm that no form of disclosed 
assistance renders the project ineligible for PBV assistance and does 
not violate 24 CFR 983.54.
    The PHA must inform the owner if any information changes during the 
application process, either by the addition or deletion of other 
governmental assistance, the project owner must provide revised 
information to correct the earlier submissions to reflect the new 
information. If at any time (either during the application process, 
after AHAP execution, or after HAP execution) the owner receives 
supplemental HUD or new governmental assistance for the project that 
results in an increase in project financing in an amount equal to or 
greater than 10 percent of the approved SLR development budget, the 
owner must submit such changes to the PHA and the PHA must notify HUD 
or the HCA.\3\ The AHAP requires that the owner disclose to the PHA 
information regarding any related assistance from the Federal 
government, a State, or a unit of general local government, or any

[[Page 12003]]

agency or instrumentality thereof, that is made available or expected 
to be made available with respect to the contract units.
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    \3\ 24 CFR 4.11.
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    Completion of an environmental review and environmental approval is 
required before an AHAP can be executed, pursuant to 24 CFR 983.153. At 
the time of initial submission of the SLR request, the PHA submits 
evidence that a request for a 24 CFR part 58 review is submitted to the 
responsible entity or a 24 CFR part 50 review is submitted to the Field 
Office.

C. Analysis and Safe Harbor Standards

    When undertaking an SLR, HUD reviews both the development and 
operating costs of a project to determine whether costs are within a 
reasonable range, taking into consideration the project's size, 
characteristics, location, costs, financing and risk factors. Costs 
that fall within acceptable safe harbor standards, as identified below, 
may move forward without further justification. If costs exceed safe 
harbor standards, then additional justification and documentation are 
required to justify the costs based on risk factors, and HUD approval 
is required.
    If the review is by an HCA, project costs exceeding the safe harbor 
standards must be consistent with the HCA's published qualified 
allocation plan.
    (A) Development Standards:
    i. General Contractor Fees: The safe harbor standard is based on 
hard construction costs. The maximum allowable combined contractor fee 
is fourteen percent (14%) of the total for hard construction costs. For 
example, if construction costs are $100,000, the safe harbor amount is 
$14,000:

 General Conditions: 6% of construction contract amount
 Overhead: 2% of construction contract amount
 Builder's Profit: 6% of construction contract amount
    ii. Developer Fee: The safe harbor standard is a maximum of 15%. 
For projects combining public housing units and PBV units in a Mixed-
Finance project, safe harbors are 9%, requiring no justification, above 
9% and up to 12%, may be approved with justification. Fees over 12% may 
be approved if the PHA receives the amount over 12% and it is 
restricted for project costs or future phases as described in the 
``Cost Control and Safe Harbor Standards for Rental Mixed-Finance 
Development,'' dated April 9, 2003 or any successor document. See 
Section 7 on Mixed Finance Projects below.
    (B) Operating Standards:
    The maximum initial term for a PBV HAP contract is 20 years 
pursuant to section 8(o)(13)(F) of the 1937 Housing Act as recently 
amended by HOTMA, although the initial terms for other funding sources 
may be less. SLR requests must include an operating pro forma that 
reflects each year of the HAP contract initial term. All assumptions 
for income, expenses and debt must be clearly identified. Both the Debt 
Coverage Ratio (DCR) and cash flow are analyzed on a year-by-year 
basis. If a project has no debt, the SLR review is processed based only 
on cash-flow requirements, as described below in 6(C)(ii).
    i. Debt Coverage Ratio: HUD and HCAs analyze the PBV development's 
projected DCR both on a yearly basis and trended over the term of the 
proposed subsidy period as an indicator of overall project health. As a 
HUD metric for PBV purposes, the minimum DCR is 1.10 and the maximum is 
1.45. The DCR for each year is determined by dividing the net operating 
income for that year by the amount of the debt service for that year. 
Factors such as operating cost increases, rent increases, project size, 
unit and income mix, and vacancy rates affect net operating income. 
Therefore, a trending analysis is also used to evaluate the DCR over 
time and to determine whether the amount of assistance is excessive. 
HUD recognizes that some projects may have higher upfront DCRs since 
owners may frontload debt service to free up cash flow later in the 
project period for higher anticipated operating expenses, or that some 
projects may have higher DCRs in later years due to planned changes in 
financing costs, interest rates, or partnership transfers. If a project 
has an overall trending DCR outside the 1.10 to 1.45 range, the project 
may have too much governmental assistance. If a project DCR trends 
outside the range for an individual year, but has an overall trending 
DCR within the range, HUD will require justifications from the Owner or 
PHA to understand the project assumptions and yearly deviations.
     Net operating income is defined as total operating income 
minus total operating expenses. The net operating income for a project 
must cover all repayable debt over the life of the HAP contract.
     Operating expenses should be trended at a consistent fixed 
rate between 1% and 3% per year for the first 5 years and 3% 
thereafter. Justification for increases above 3% must be provided.
     Rent increases should be trended yearly at a consistent 
fixed rate between 2% and 3% per year. Justification is required for 
increases outside this range.
     Vacancy rates must not exceed 7%.
     Debt service is defined as the funds required to make 
payments on all non-forgivable loans, including any existing debt on 
the property. Debt service does not include forgivable/soft loans, non-
repayable grants, non-repayable federal, state or local assistance, 
deferred developer fees, financing fees, partnership fees, management 
fees, capital contributions, tax concessions, or tax credits.
    If the projected DCR remains between 1.10 and 1.45 during the 
initial term of the HAP contract, then it is assumed the project has 
enough cash-flow to pay operating expenses and amortized debt, and that 
the amount of government assistance is not excessive. HUD will require 
adjustments if the projected DCR in any one year falls below 1.10 and 
it continues to remain below 1.10 for a series of subsequent years as 
cash flow would not be enough to ensure stable operations. Likewise, 
HUD will require adjustments to PBV assistance, if the projected DCR 
exceeds the maximum of 1.45 in any one year and continues to remain 
above 1.45 for a series of subsequent years.
    ii. Cash-Flow: For any given year of the project's operating pro 
forma, cash flow may not exceed 10% of total operating expenses. Cash-
flow is defined as net operating income minus all required debt 
service.
     If all or a portion of the developer fee has been deferred 
and is owed, the face value amount of the deferred developer fee (i.e., 
no interest earned) may be deducted from cash flow.
     Operational and replacement reserves may be deducted from 
cash flow when reserves are adjusted by a consistent amount each year.
     No further adjustments to cash-flow are permitted beyond 
deferred developer fees, operational reserve contributions and 
replacement reserve contributions.
    If in any given year the annual cash-flow is greater than 10% of 
total operating expenses and it remains above 10%, it is assumed the 
cash generated from the government assistance is greater than is 
necessary to make the project feasible. Therefore, adjustments must be 
made by the project owner to reduce cash flow to 10% or less of 
operating expenses. If the owner declines, HUD will reduce PBV rents or 
the number of PBVs, so the project complies with the 10% requirement.

[[Page 12004]]

D. Requesting a SLR for a Mixed-Finance Project

    For Mixed-Finance projects that also include PBVs, the SLR is 
handled as part of the Mixed-Finance project review process without a 
separate PBV SLR review. SLRs for Mixed-Finance projects are only done 
by HUD and may not be done by an HCA. Mixed-Finance reviews are done by 
HUD's Office of Public Housing Investments (OPHI) at HUD Headquarters. 
This provision also applies to Mixed-Finance projects with PBVs that 
are undertaken as part of the Choice Neighborhoods Grant Program, as 
well as Choice Neighborhoods projects that have PBVs, but no public 
housing. This includes MTW local nontraditional development (LNTD) 
proposals. OPHI prepares the SLR as part of the project review process 
without a separate PBV SLR review.
    As it relates to the PBVs, Mixed-Finance projects must comply with 
the SLR standards identified above in the Notice. In addition to this 
review, the project will also be reviewed to assure compliance with the 
provisions of 24 CFR 905 Subpart F, and other applicable guidance, 
including the following:
     The ``Cost Control and Safe Harbor Standards for Rental 
Mixed-Finance Development,'' dated April 9, 2003 or any successor 
document.
     Total Development Cost (TDC) and Housing Construction Cost 
(HCC) limits imposed on the project, pursuant to HUD Notice PIH-2011-38 
or successor notice.
     The HUD Pro Rata Test, which assures that the proportion 
of HUD public housing funds committed to development of the project 
does not exceed the proportion of public housing units in the project. 
For example, if there are 120 units in the project and 50 are public 
housing, 42% of the units are public housing. Therefore, the amount of 
public housing funds contributed to the development of the project may 
not exceed 42% of the development budget, including hard and soft 
costs.
     HUD will review the amount of LIHTC equity to be invested 
in the project to ensure that the sale of LIHTCs results in an amount 
of net tax credit equity that is consistent with amounts generally 
contributed by investors to similar projects under similar market 
conditions, and that the amount is not less than 51 cents for each 
dollar of tax credit allocation awarded to a project. If the project 
receives 51 cents or less of LIHTC equity or does not receive a market 
rate of equity, it is subject to additional review to reassess the 
project's fees and costs.

E. Outcome

    (A) HUD:
    If HUD completes the SLR and determines the PBV assistance complies 
with the standards set in this Notice, where the PBV assistance will 
not result in excessive government subsidy, HUD will certify compliance 
pursuant to 24 CFR 4.13 and the local HUD Field Office will notify the 
PHA in writing.
    If HUD completes the SLR and determines that the amount of 
government subsidy, including the PBV assistance, is excessive, HUD 
notifies the PHA. The notification includes a recommendation to reduce 
the amount of PBV assistance or a determination that PBV assistance 
cannot be provided. Once the PHA receives HUD's decision, the PHA must 
notify the owner in writing of the outcome and work with the owner to 
restructure, as needed. Revised materials must then be resubmitted to 
the HUD Field Office for review.
    (B) HCA:
    If an HCA completes the SLR and determines that PBV assistance 
complies with the above standards of this notice and does not result in 
excessive government subsidy, the HCA must notify the PHA and submit a 
certification to HUD at [email protected] with 
a copy to the Director of the local HUD Office of Public Housing 
(https://www.hud.gov/program_offices/public_indian_housing/about/field_office) stating that the PBV assistance to be provided is in 
accordance with HUD SLR guidelines in this Notice and that a 
determination has been made that it does not result in excessive 
government subsidy. The AHAP/HAP contract may then be executed if the 
environmental approval is received. If the SLR is performed by an HCA, 
subsequent approval of the SLR by HUD is not required. The HCA 
certification must include the documents outlined in Section 10. See 
Appendix C for a sample HCA certification letter and Appendix A for 
required information.
    If the HCA SLR determines the public assistance amount is 
excessive, the HCA must notify HUD, in writing, with a copy to the PHA. 
The notification will include either a recommendation to reduce the 
amount of PBV assistance or the amount of LIHTC allocation or a 
determination that PBV assistance cannot be provided. HUD will consult 
with the HCA and the PHA prior to issuing a final determination to 
adopt the HCA's recommendation or to revise it. The PHA must notify the 
owner in writing of the outcome and work with the owner to restructure, 
as needed. Revised materials must then be resubmitted to the HCA and 
the HUD Field Office for review.
    When a proposal for PBV assistance is contemporaneous with the 
application for or award of LIHTCs, the required SLR may be fulfilled 
by the HCA in accordance with IRC section 42(m)(2) review if such 
review substantially complies with the HUD SLR requirements and 
guidelines.
    (C) Mixed-Finance Projects: If HUD completes the SLR and determines 
the PBV assistance and other public housing assistance complies with 
the above standards of this Notice for Mixed-Finance projects and thus 
does not result in excessive government subsidy, HUD will certify 
compliance pursuant to 24 CFR 4.13 and notify the PHA.
    For projects that fail to comply, HUD will notify the PHA, which 
must (i) work with the owner to restructure the project so it complies 
with the above standards for Mixed-Finance projects and resubmit the 
revised documentation to HUD for approval, or (ii) provide sufficient 
justification to HUD to allow HUD to approve a variation(s) from the 
above standards.

F. Timing

    In accordance with program regulations at 24 CFR 983.55, a PHA may 
not execute an AHAP contract until after the SLR is completed and 
approved by HUD or the HCA. The AHAP also may not be executed until 
there is a completed environmental review (ER) and written approval by 
the responsible entity or HUD, pursuant to 24 CFR part 50 or Part 58 
and PIH Notice 2016-22. The local HUD Field Office must receive the 
completed SLR and either approve the Request for Release of Funds or 
complete a Part 50 environmental review prior to notifying the PHA that 
it may execute the AHAP. The PHA may request an SLR and environmental 
review simultaneously. The Field Office confirms to the FMD and/or the 
HCA that the ER process is complete.
    If the owner reports to the PHA the addition of any governmental 
assistance before or during the AHAP contract when no SLR was initially 
required because the project had not received and did not anticipate 
receiving governmental assistance, then an SLR is required to be 
requested by the PHA at the time of the owner's report.

III. Housing Credit Agency Participation and Certification

    An HCA is ordinarily established for the purpose of allocating and 
administering the LIHTC program under

[[Page 12005]]

section 42 of the Internal Revenue Code (IRC). With HUD approval, HCAs 
may perform SLRs for proposed PBV projects that include LIHTCs as part 
of the proposed financial assistance. If there are no LIHTCs, HCAs 
cannot conduct the SLR. SLRs without LIHTCs will only be conducted by 
HUD. Currently 29 states have a HUD-approved HCA; the remaining 21 
states may seek HUD approval to conduct SLRs for PBV projects, by 
submitting a letter to HUD notifying HUD of their intent to 
participate. Appendix B is sample letter.
    Pursuant to the requirements outlined herein, as well as the 
Memorandum Of Understanding (MOU) between participating HCAs and HUD, 
HCAs are required to provide notification to the FMD through the FMD 
mailbox of any SLRs approved on HUD's behalf by no later than 30 days 
from the date of authorization. Notifications of approval must contain 
the following documentation:

 Copy of the Signed HCA Certification as shown in Appendix C
 The HCA's Internal Recommendation and Sign-off
 The Developer's Disclosure of Sources and Uses of Funds
 The Developer's Operating Pro Forma Considered
 Copy of the PBV Commitment/Award Letter
 HUD Form 2880, and
 Rent Information and Project Summary
    a. Project Name and Address
    b. PHA name and code
    c. Field Office name and code
    d. HCA Name
    e. PBV Type: Rental Assistance Demonstration (RAD), Veterans 
Assistance and Supportive Housing (VASH), and/or Regular
    f. Elderly, Disabled, Homeless, Non-Elderly Disabled, Low-Income, 
and/or Veteran.
    g. Is the Project New Construction or Rehabilitation?
    h. Amount Per Dollar of Syndication Proceed
    i. Number of PBV Units Approved by Bedroom Size
    j. Debt Coverage Ratio: ____
    k. Project meets Cash Flow Criteria (Y/N)

IV. Overview Chart

    The following chart summarizes the types of projects that require 
an SLR, the entity authorized to perform the SLR and the required 
certification. 102 (d) Certification is the owner's certification of no 
additional government funding using form HUD 2880.

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                                                            102 (d)
  Type of project and scenarios      SLR reviewer        certification
                                                           required?
------------------------------------------------------------------------
PBV subsidy without LIHTC.        HUD...............  Yes.
 However, project is new
 construction or rehabilitation,
 as defined in 24 CFR Sec.
 983.3, with 2 or more forms of
 government assistance.
PBV existing housing, as defined  No SLR required...  No.
 in 24 CFR 983.3.
PBV new construction or           No SLR required...  No.
 rehabilitated housing, but PBV
 is the only form of government
 assistance.
PBV subsidy with LIHTC, new       HCA or HUD........  If by HCA,
 construction or rehabilitated                         certification not
 project.                                              required.
                                                       Otherwise, HUD
                                                       certifies.
Mixed-finance projects, with or   HUD...............  Yes.
 without LIHTC, with or without
 PBV, with or with other forms
 of government assistance.
------------------------------------------------------------------------

V. Monitoring

    HUD performs quality control reviews of SLRs performed by 
participating HCAs by examining the following:

 If all required document and materials are available to the 
reviewer
 If values are correctly determined within the approvable range
 If values are above safe harbor standards
 If documentation was provided to justify higher costs
 If the subsidy was reduced correctly (if applicable)

    If any required documentation is not provided, or any portion of 
the review is performed incorrectly, HUD requires appropriate 
corrective action. When an SLR is performed by an HCA, subsequent 
approval of the SLR by HUD is not required.

VI. Paperwork Reduction Act

    The information collection requirements contained in this notice 
are currently approved by the Office of Management and Budget (OMB) 
under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and 
assigned OMB control numbers 2577-0169. An agency may not conduct or 
sponsor, and a person is not required to respond to, a collection of 
information unless the collection displays a currently valid control 
number.

    Dated: February 21, 2020.
R. Hunter Kurtz,
Assistant Secretary for Public and Indian Housing.

Appendix A: PHA Submissions

    PHAs are responsible for collecting information from project 
owners and assembling it in an SLR request submitted to the local 
HUD Public Housing Field Office or HCA. SLR requests must contain 
the following information. Assembly using a binder is recommended. 
Incomplete submissions will be returned.

------------------------------------------------------------------------
   Required elements of an SLR application &
                   checklist                              Check
------------------------------------------------------------------------
1. Subsidy Layering Review request memorandum:
 Clearly identify the PHA, the PHA number, the
 Field Office number, the project's name, the
 project's total number of units, and the
 number of PBV units requested. For a sample
 memorandum see Attachment 1 of PIH Notice
 2013-11 or newer version superseding it.
2. Project Description: Short narrative
 identifying ownership, type of activity
 (rehabilitation or new construction),
 location (including county), total units,
 requested PBV units, PBV type (RAD, VASH,
 regular), utility allowances, bedroom
 distributions, supportive services (if
 applicable) and residential population
 (homeless, veteran, elderly, low-income
 families) The narrative should also identify
 any exceptions applicable to the project
 (e.g., number of PBV exceeding the Project
 Cap).

[[Page 12006]]

 
3. Accounting Statement of Sources and Uses of
 Funds: Identifying each source and indicate
 type (loan, grant, syndication proceeds,
 contributed equity). Sources generally
 include only permanent financing and grants.
 If interim financing or a construction loan
 is proposed, provide details in project
 description. Separately identify detailed
 uses, avoiding broad categories such as
 ``soft costs.'' Under acquisition costs,
 identify purchase price separately from
 related costs such as appraisal, survey,
 title, recording and legal fees. Include
 separate line items representing construction
 contract amount, builder's profit, builder's
 overhead and total project costs. [Complete
 HUD Form 50156]
4. Description of funding sources: Loans
 including principal, interest rate,
 amortization, term, and any accrual,
 deferral, balloon or forgiveness provisions.
 Describe any lender, grantor, or syndicator
 requirements for reserves or escrows
 requirements. Describe if a lender receives a
 portion of the net cash-flow, either as
 additional debt service or in addition to
 debt service. Identify the amount of LIHTC
 and include IRS form 8609.
5. Commitment Letters: Lenders and other
 funding sources evidence their commitment to
 provide funding and disclose significant
 terms. Signed loan agreements and grant
 agreements meet this requirement. However,
 proposal letters and letters of intent do not
 meet this requirement.
6. Developer's Commitment Letter: Delineating
 any arrangements, contributions, donations,
 significant terms or transfer of funds from
 the developer and/or participating partners
 such as deferred developer's fees, cash
 contributions, and equity investments.
7. HOME Commitment Letter: (When applicable)
 Signed document clearly identifying
 requirements of the HOME designated units and
 intended rents.
8. Supportive Service Commitment: (When
 applicable) A signed Memorandum of
 Understanding that describes the type of
 services to be provided, frequency, terms of
 service and resident eligibility.
9. Appraisal Report: Based on the ``as is''
 value of the property, before construction or
 rehabilitation, and without consideration of
 any financial implications of tax credits or
 project-based voucher assistance. An
 appraisal establishing value after the
 property is built or rehabilitated is not
 acceptable unless it also includes an ``as
 is'' valuation. The date of the appraisal to
 be within six months of date of submission.
10. Stabilized Operating Pro Forma: Including
 projected rental, commercial, and
 miscellaneous gross income, vacancy loss,
 operating expenses, debt service, reserve
 contributions, with cash-flow projections,
 and debt service ratios; income and expenses
 trended at a consistent percent. [Complete
 HUD Form 50156]
11. Low-Income Housing Tax Credit Allocation
 Letter: Issued by the authorized tax credit
 allocation agency, identifying the amount of
 LIHTCs reserved for the project.
12. Historic Tax Credit Letter: Issued by an
 authorized historic credit agency, disclosing
 the estimated historic tax credit amount
 awarded to a project located in a designated
 historical area.
13. Equity Contribution Schedule: If equity
 contributed to the project is paid in
 installments over time, provide a schedule
 showing the amount and timing of planned
 contributions.
14. Bridge Loans: Providing details if the
 financing plan includes a bridge loan where
 equity contributions proceeds planned over an
 extended time can be paid upfront.
15. Disclosure, perjury and identity of
 interest statement (Form HUD-2880) completed
 by the owner.
16. PBV award letter: Identifying the housing
 authority's approval of project-based voucher
 assistance for the project by number of units
 and bedroom distribution.
17. PHA rent certification letter: Documenting
 proposed contract rents, utility allowances,
 and gross rental amounts for assisted units.
 Include rent reasonableness documentation or
 comparability analysis as evidence of rent
 determination and certification.
18. Environmental Clearance: Completion of the
 environmental review and environmental
 approval is required before AHAP approval can
 be granted. At the time of initial submission
 of the SLR request, submit evidence that a
 request for a part 58 review is submitted to
 the responsible entity or a part 50 review is
 submitted to the Field Office.
------------------------------------------------------------------------

Appendix B: HCA Notice of Intent To Participate

U.S. Department of Housing and Urban Development
PIH Financial Management Division, Room 4232
451 Seventh Street SW
Washington, DC 20410

By: Email: pih.financial.management.[email protected]

Re: Intent to Participate on Subsidy Layering Reviews

To Whom It May Concern:

    The undersigned is a qualified Housing Credit Agency (HCA) as 
defined under Section 42 of the Internal Revenue Code of 1986 and 
hereby notifies the United States Department of Housing and Urban 
Development (HUD) of our intention to conduct subsidy layering 
reviews (SLRs) pursuant to HUD's requirements for the purpose of 
ensuring the combination of assistance under the Section 8 Project-
Based Voucher (PBV) Program with other federal, state, or local 
assistance does not result in excessive compensation. By signifying 
this notice, the undersigned hereby certifies that:
    Required personnel reviewed the statutes identified in Federal 
Register Notice (Insert new reference) Contracts and Mixed-Finance 
Development, and 24 CFR 983.55.
    The undersigned understands its HCA responsibilities and 
certifies it will perform SLRs in accordance with all present and 
future statutory, regulatory and HUD requirements. The undersign 
acknowledges participation continues unless and until HUD revokes 
this notice or the undersigned informs HUD, in writing with a 30-
day-notice, of its decision to withdraw. Upon HUD approval, the 
undersigned shall immediately assume the responsibility of 
performing SLRs.

Name of agency and address:
Name, title and address if authorized official
Phone, FAX, and email:
Date of execution:

    Transmit signed and dated notice of Intent to Participate as a 
PDF attachment to Miguel Fontanez at pih.financial.management 
.[email protected] with subject line identified ``Submission of 
Notice of Intent to Participate.'' For questions concerning the 
submission and receipt of the email, call the Financial Management 
Division at (202) 402-4212.

Appendix C: HCA Certification

U.S. Department of Housing and Urban Development
PIH Financial Management Division, Room 4232
451 Seventh Street SW
Washington, DC 20410

By: Email: pih.financial.management.[email protected]

Re: Certification of Subsidy Layering Review

To Whom It May Concern:

    For purposes of providing of Section 8 Project-Based Voucher 
(PBV) Assistance authorized pursuant to 42 U.S.C. 8(o)(13), section 
2835(a)(1)(M)(i) of the Housing and Economic Recovery Act of 2008 
(HERA), section 102 of the Department of Housing and Urban 
Development Reform Act of 1989, and in accordance with HUD 
requirements, all of which address the prevention of excess 
governmental subsidy, I hereby certify that

[[Page 12007]]

the PBV assistance is not more than is necessary to provide 
affordable housing after taking into account other government 
assistance for the following project:

Name, address of project:
Name, address of PHA:
Phone, FAX, and email:
Name, address of HCA:
Date of HUD's approval of HCA's intent to participate:
Name of Authorized HCA Certifying Official:
Signature of Authorized HCA Certifying Official:
Date:

    Transmit signed and dated SLR certification as PDF attachments 
to Miguel A. Fontanez at pih.financial.management.[email protected], 
with a copy to the Director of the local HUD Office of Public 
Housing: https://www.hud.gov/program_offices/public_indian_housing/about/field_office, with subject line identified ``SLR 
Certification--Project Name, City, State'' For questions concerning 
the submission and receipt of the email, call the Financial 
Management Division at (202) 402-4212.

[FR Doc. 2020-04147 Filed 2-27-20; 8:45 am]
BILLING CODE 4210-67-P